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ELECTRIC DEREGULATION FACT SHEET

BACKGROUND

In 1992, the Congress passed the Energy Policy Act, setting the stage for electric utility industry deregulation and restructuring. The Energy Policy Act left decisions about the form and timing of deregulation to state legislatures, at least initially.

WHERE

Twenty-three states have passed legislation or regulations to deregulate electric utilities.

WHAT

Electricity deregulation means that a state government will allow companies that generate electricity to sell directly to consumers. (The transmission and distribution of electricity are not yet being deregulated in most states.)

WHY

Large industrial users of electricity have pressured state governments to deregulate electricity in order to get cheaper electricity through private deals with companies that generate electricity. Competition among power generating companies will eliminate waste and inefficiency in the industry, according to some officials and private sector analysts.

WHO

State legislatures have the final say over how consumers will be treated in a deregulated electricity marketplace. Usually all of the following groups try to shape how deregulation will be carried out in any particular state: the state Attorney General, the state department that oversees utilities, the existing electric utility companies, the new private power generating companies, and consumer groups.

YOU

When your state deregulates electricity, you will be able to shop around for electricity on your own, just as you buy long-distance telephone services now. In fact, telemarketers will be busy at work to convince you that their electricity package is the best, but there are other options, such as a community electricity franchise.

YOUR ELECTRIC BILL

Your electricity bills are based on the costs of the following:

• Generation - The act of changing other forms of energy, such as fossil fuels, nuclear or renewable energy, into electricity. This word is sometimes used to mean the electricity that has been generated.
• Transmission -The delivery of electricity from a generator to a distribution company over high-voltage power lines.
• Distribution - The use of wires by your distribution company to deliver electricity to your home or business.
• Efficiency Programs - Programs that reduce energy use in order to lower electric bills.
• Transition Charge - Often called stranded costs, covers the cost of past utility investments, including power plants and power contracts, which cannot be fully recovered in a competitive market.

GLOSSARY Terms and definitions may vary depending on electricity deregulation legislation passed by the states.

Competitive Power Supplier

Sometimes called electricity suppliers, electricity providers, power generators, or power sellers, sell the power to be delivered by your distribution company.

Contract Terms

The agreement between a competitive power supplier and a consumer, including the length of service and whether there are penalties for early termination.

Default Service

Provides customers with a continuous power supply at a rate based on market prices when they have not chosen their own provider.

Deregulation

Restructuring.

Electricity Broker

A company or individual that arranges the sale of power to customers, but does not take title to the power and is therefore not the seller.

Kilowatt-hour or kWh

The standard unit to measure electricity. For example, ten 100-watt light bulbs used for 1 hour use one kilowatt-hour (1,000 watt-hours) of electricity.

Municipal Utility

A nonprofit utility owned and operated by the community it serves.

Power Sources

The fuels used to produce electricity, such as nuclear, fossil fuels (oil, coal, and natural gas), and renewable energy resources (for example, hydro, wind, biomass, and solar).

Pricing Options

Some competitive power suppliers may charge different rates for electricity according to when it is used or how much is consumed, or they may include other services in the price such as energy efficiency or Internet service.

Restructuring

Opening a market (such as the market for electricity), whose prices and practices were formerly fully regulated by government, to competition.

Stranded Costs

Any lost investments on those power plants or contracts to purchase electricity which local utility companies may be required to sell under restructuring legislation. In some states, these costs appear on electricity bills as "transition" charges.

Source: Self-Reliance Corporation